OvervieW:
USD/JPY is trading with bullish bias after hitting five-year high 104.37 this morning. The rate is underpinned by bullish dollar sentiment (ICE spot dollar index last 80.61 versus 80.01 early Wednesday) and yen-funded carry trades amid positive investor risk sentiment (VIX fear gauge fell 14.87% to 13.8; S&P surged 1.66% overnight to record-closing high of 1810.65) after the Federal Reserve announced it would reduce its bond-buying, beginning in January, by a modest $10 billion to $75 billion a month and said interest rates are likely to stay close to zero "well past the time that the unemployment rate declines below 6.5%". USD/JPY also supported by larger-than-expected 22.7% on-month increase in U.S. November housing starts to nearly-six-year high of 1,091,000 (versus 952,000 forecast); higher U.S. Treasury yields; demand from Japan importers; expectations that the Bank of Japan will expand monetary easing measures further to support economic growth and to reach its 2% inflation target by the end of March 2016. But USD/JPY gains are tempered by Japan exporter sales.
Technical comment:
Daily chart is positive-biased as MACD and stochastics are turned bullish; five- and 15-day moving averages are advancing.
Trading recommendations:
The pair is trading above its pivot point. It is likely to trade in a higher range as far as it remains above its pivot point. As far as the price is above its pivot point, a long position is recommended with the first target at 104.35 and the second target at 104.6. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 103.4. The breach of this target will move the pair further downwards and one may expect the second target at 103.1. The pivot point stands at 103.7.
Resistance levels:
104.35
104.6
105
Support levels:
103.4
103.1
102.75